On 20 May 2016 the Bulgarian government resolved to begin open tender proceedings for the concession of the Sofia Airport which has been brought to a halt by the Bulgarian Competition Protection Commission.
With a formal resolution dated 20 May 2016, the Bulgarian government started open tender proceedings for the concession of the Sofia Airport. Official notice of the tender was published in the official journal of the European Union (No 2016/S 105-187282), on the website of the Bulgarian State Gazette (No 2 from 2 June 2016), and in the National Concession Registry on 2 June 2016 (No. A – 000796/2.06.2016). Documentation for participation in the open tender is published on the website of the Ministry of Transport, Information Technologies and Communication (the "Ministry of Transport") under section "Concession for Sofia Airport".
On 15 June 2016, Mohamed Abdulmohsin Al Kharafi & Sons Company for General Trading, General Contracting and Industrial Structures W.L.L. ("MAK") and ADMAK General Contracting Company W.L.L. ("ADMAK") submitted an appeal against the decision for opening a tender for the concession of the Sofia Airport before the Bulgarian Competition Protection Commission (the "Commission"). The Commission, being the controlling institution of first instance for the lawfulness of acts of state authorities within concession proceedings under the current Concession Act, opened proceedings for the review of the Bulgarian government's resolution from 20 May 2016 as a result of the appeal.
The appellants (MAK/ADMAK) were assignees under the construction agreement for reconstruction and development of the Sofia Airport's new runway. In 2011, in their capacity as assignees, they had instituted and won arbitration proceedings before the ICC Court of Arbitration against Sofia Airport. The ICC Court of Arbitration awarded MAK/ADMAK damages in the amount of USD 26,802,343.39 and interest on different parts of the latter sum in the amount of LIBOR plus 1.5 %; and the refund of guarantees in the total amount of USD 10,594,600; as well as payment of all costs. The execution of the arbitration decision was permitted by the Bulgarian civil court, however the decision was then appealed by the Sofia Airport. To date the proceedings are still pending before the highest cassation court.
According to the website of the Commission, the appeal contained a request for interim measures. The Commission does not provide more detailed information about the interim measures requested by the appellants nor the content of the appeal. However, according to the Ministry of Transport, the Bulgarian government's decision to begin open tender proceedings for the concession of the Sofia Airport, has been brought to a halt.
What could happen next?
The Commission has to decide on the appeal within two months of the date from which they opened the proceedings, which means that a decision might be expected in the second half of August.
The Commission may:
- dismiss the appeal;
- repeal the government's decision and provide binding instructions to the government regarding opening of the tender proceedings; or
- announce the government's decision null and void.
Furthermore, the Commission's decision might be appealed before the Supreme Administrative Court which, in turn, has two months to make a decision. The Supreme Administrative Court decision will be final and binding.
Concession for Sofia Airport
The concession for the Sofia Airport has as its objectives, the management of services of public interest, and the management and maintenance of the Sofia Airport for public use at the risk of the concessionaire. The services are described further in the resolution of the Bulgarian government for the opening of the tender procedure.
According to the resolution, the term of the concession is 35 years. The resolution envisages a lump-sum payment in an amount offered by the concessionaire but not less than BGN 550,000,000 (approx EUR 281,000,000) and due VAT thereon to be paid within two months of the signing of the concession agreement.
Furthermore, the annual concession payment should be fixed as a percentage of the total amount of net revenues derived from all activities in the present year (as offered by the concessionaire). Nevertheless, the amount of the annual concession payment should not be less than BGN 9,957,000 (EUR 5,090,933) and will be corrected every third year with the applicable annual inflation indexes of the consumer prices with accumulation for the respective period. The final amounts of the lump-sum payment and annual concession payment will be fixed with the resolution of the Bulgarian government for appointment of the concessionaire. According to the resolution to begin open tender proceedings, the amounts of both payments offered by the participants will hold the biggest relative weight (55 %) by the complex assessment of the offers.
In addition, the concessionaire will have no obligation to participate in the proceedings pending before the Bulgarian civil court for execution of the decision of the ICC Court of Arbitration on the arbitration case between Sofia Airport and the MAK/ADMAK, nor any obligation to pay the indemnity to MAK/ADMAK under the decision of the ICC Court of Arbitration if its execution is finally permitted by the civil court.
By Alexandra Doytchinova, Managing Partner (Bulgaria), and Mariya Papazova, Attorney at Law, Schoenherr